Digital Desk: To expedite the disinvestment of the country's largest insurer, the Union Cabinet has approved up to 20% foreign direct investment (FDI) through the automatic route in the IPO-bound Life Insurance Corporation of India (LIC).
According to reports, the Cabinet led by Prime Minister Narendra Modi took the decision in this regard.
India's largest insurance firm aims to sell a 5% interest to raise $8 billion in the country's largest initial public offering (IPO).
According to a government source, the change would allow foreign direct investors to buy up to 20% of LIC's shares through an automated process.
Foreign investment is now prohibited in the LIC, which is seen by a special parliament act but is permitted in other private insurance companies to the tune of 74%.
According to a government source, the modification would allow the government to increase the foreign direct investment limit in the LIC to 20%, similar to the regulation for state-run banks.
The cabinet decision comes amid growing investor concerns that the government may delay the LIC's public listing due to increased market volatility following Russia's invasion of Ukraine.
On the other hand, the official has stated that there are no intentions to postpone the insurance company's listing, which is crucial for plans to obtain funds for scheduled spending.
According to the IPO filing, the firm will reserve a set percentage of shares for policyholders in the IPO, not exceeding 10% of the offered size, while the portion held for workers will not exceed 5% of post-offer equity share capital. As of the end of March 2021, LIC employs 114,498 individuals.
With over 280 million policies and over 60% of the insurance segment, LIC was founded six decades ago when India's insurance market was nationalized, which spans the country's business.
